A firm will produce either product A or B. The total costs (TC) for both products can be estimated by the equations Product A:  TC = $300,000 + ($23 x Sales volume) Product B:  TC = $100,000 + ($29 x Sales volume) The firm believes there is a 20% chance for the sales volume of each product to equal 10,000 units and an 80% chance they will both equal 20,000 units. The selling price of product A is $42, and the selling price of product B is $40. The expected profit from producing product B equals   a. $680,000 b. $390,000 c. $98,000 d. $120,000

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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A firm will produce either product A or B. The total costs (TC) for both products can be estimated by the equations

Product A:  TC = $300,000 + ($23 x Sales volume)

Product B:  TC = $100,000 + ($29 x Sales volume)

The firm believes there is a 20% chance for the sales volume of each product to equal 10,000 units and an 80% chance they will both equal 20,000 units. The selling price of product A is $42, and the selling price of product B is $40. The expected profit from producing product B equals

 

a. $680,000
b. $390,000
c. $98,000
d. $120,000
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